How To Write a Business Plan

Article
Mar 15, 2013

Let’s get down to the business of writing a business plan. There are a myriad of resources to help you with the process, each of them containing basically the same information with slightly different styles and formats.

Make the first plan your own

The book “How to Write a Business Plan,” by Mike McKeever, offers two routes: the comprehensive plan and the “quick plan,” which can be completed in one day. This comes in handy if you choose to write a preliminary plan for yourself, as recommended by several experts.

“The first business plan you write should be for nobody but yourself,” says Norm Bodsky in his book,

“Due Diligence.” “You just need to answer four questions as honestly as you can: 1) what is the concept? 2) How will you market it? 3) How much do you think it will cost to produce and deliver what you’re selling? And 4) what do you expect will happen when you start making sales?”

Bodsky says the main idea of this first plan is to spell out as clearly as possible how you think the business is going to work, and to test your assumptions before you try to raise money or present this plan to anyone else. This will help you keep mistakes and unrealistic expectations to a minimum.

Remember that any plan you eventually end up with is never really “final.” Business conditions are constantly changing, and new opportunities are always presenting themselves. Know that you can and should review and improve your plan to maximize its effectiveness as a guide for your business.

“Writing a plan allows you to see how changing parts of the plan increase profits or accomplish goals,” says McKeever in “How to Write a Business Plan.” “You can tinker with individual parts of your business with no cash outlay.”

That said, you will eventually want to write a full-blown plan. While we can’t provide a comprehensive description (there are whole books on the subject!), here are some steps that will help you through the process.

The introduction

According to “The Instant Business Plan: Twelve Quick and Easy Steps to a Successful Business,” by Gustav Berle, Ph.D. and Paul Kirschner, the introduction contains three elements: the cover letter, the cover sheet and the table of contents.

If presenting to a banker, the letter should include the highlights of your introduction. The introduction should touch on the most important points of the plan, giving the reader an idea of what they are about to get into. Though it should be brief, this section is very important because you are molding the reader’s impression of your business.

This summary is also included at the beginning of the plan. “The first page of your plan should state your objectives as simply as possible,” says David H. Bangs, Jr. in “The Business Planning Guide.” “If the plan is for your sole use, the statement can be brief. However, if the plan is also to be used as a financing proposal, the statement becomes more complex.”

If you are preparing the plan for a banker, Berle and Kirschner suggest including in the summary a description of your business, the amount of your loan request, your payback plan and what security you offer for your loan.

The cover sheet simply says something to the effect of “1999 Business Plan for Joe’s Power Equipment” in block letters or headline format. If presenting it to a banker, include another sentence below, saying “Prepared especially for (lender’s name and name of institution).”

One of the most important factors of your business plan is to make it easy to use, so the table of contents is another important page. It will be referred to throughout the life of the plan. Organize it well, displaying every section of the plan with the corresponding page number. You will have sub-entries on the table of contents as well in certain sections that contain several key pages, such as your financial section.

Be sure to list every document you are including in the plan. Business identification, purpose, description Depending on what resource you use, this section is broken down differently. Berle and Kirschner, for example, break down business identification, purpose and description into three of their 12 steps. Others combine them.

Let’s start with identification. In addition to your name and tagline, you should also include all the identifiers of your business: your address, your phone and fax numbers, tax number, names of principals and more. Include the legal definition of your business and if you are incorporated.

Now that you’ve identified the dealership on a surface level, the business purpose and description will require a deeper, more thorough representation of your business.

In this section, Bangs says you will want to explain three points:

• What your business is

• How you run it

• Why you think your business will succeed

“Deciding what your business is — and what it will be in five years — is the most important single decision you have to make,” says Bangs. His book offers seven questions helping you pare the information down, touching on the business’ form, status, profitability, hours of operation and seasonality.

McKeever says you should develop a problem statement — describe the problem customers have, and how you solve it. He says that this part may take a little time and a few drafts before you’re happy with the statement. “The important thing is not how long it takes to do this, but that you end up with a realistic, well-thought-out business description,” says McKeever.

Market research and competition

This section of the plan is very important because this is where you prove the population around you needs your service, and that the market can support your dealership. If presenting the plan to a banker, this section of the plan is weighted heavily in the decision. Most bankers aren’t very familiar with the unique needs and services offered by a power equipment dealership. Here is your chance to draw a picture for them of how effective your business can be in the marketplace.

Berle and Kirschner say, “The more meaningful figures that you have at your disposal, the easier it will be to prepare a business plan that will work for you — and open the doors to potential loan demands.”

A significant part of this section should talk about your customer. Discuss not only the demographic makeup of the typical customer (and prospect), but also their buying tendencies. There are several surveys out there from marketing research firms that have already done national (and sometimes regional) research for you.

Research does not have to be expensive. There are several ways to get this information. First, start with your own built-in focus group: your current customer base. Second, check with trade journals. For instance, Yard & Garden magazine has done several articles on the issue. Also look at end-user magazines (A good example: Organic Gardening magazine regularly conducts a survey of its readers). The library and the Internet are two other excellent resources. And don’t forget your vendors. Many manufacturers conduct their own product and customer research that would lend itself well to your business plan.

Make sure this section demonstrates one important point: “You want to be able to identify your best (most profitable) prospects and understand them well enough to be able to satisfy their perceived needs,” says Bangs.

Although this section falls toward the middle of the business plan, the research you conduct should happen before you start writing, since the research may well affect your business direction.

When discussing the competition, be sure to include specifics. And, after demonstrating your understanding about their customer attraction, make sure you also emphasize how your business is different and/or better at attracting customers. How will you gain market share?

Management

Make sure you maximize one of your biggest assets: you. “The person or persons who run the business will determine, more than any other factor, whether the enterprise has a chance to succeed or is doomed to crash with the first ill wind,” says Berle and Kirschner.

In this section, name each principal and discuss related business experience. It is, in fact, a good idea to attach a resume for each principal. Next, discuss the job descriptions, salaries and benefits. Also mention here what external management assistance you call on (marketing or business consultants, accountants, etc.).

This is also a good place to mention (and attach to the business plan) if you have a written employee policy.

Marketing Strategy

Now that you’ve proven your potential for growth and talked about your customers and prospects, you must show how you will market your products and services.

“Marketing is the strategic plan to put you in touch with the customer in order to satisfy their needs, wants or desires,” says Berle and Kirschner. “Figure out how to promote your company using all the tools available to you, including public relations and advertising,” says Bangs.

Financial information

“The heart of the operation is in the accounting system,” says Bangs, “Control is essential. If you don’t control your business, it will control you.”

“This is the make-or-break section,” says Berle and Kirschner. “It is the one a potential lender will understand best and will examine most closely for completeness, accuracy and realism.”

According to Berle and Kirschner, the financial section should include the following information:

• Capital requirements

• Depreciable assets

• Pro forma balance sheet

• Break-even analysis

• Projected income statement

• Cash flow projection and analysis

Supporting documents

The back-end of your business plan should include the supporting documents you discussed throughout the body of the plan. Put them in the same order as referenced in the plan, and clearly label them. You’ve got the ingredients of a winning plan.